Four Reasons to Take a Shine to These Five Silver ETFs

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Includes: AGQ, DBS, SIL, SIVR, SLV
by: Tom Lydon

With gold prices skyrocketing to new heights, it may be cheaper and even more profitable to look at silver ETFs instead.

You might believe, like many, that gold is inching toward a top. If that’s so, here are some reasons you might consider silver:

  • Peter Krauth for ETF Daily News believes that silver and gold will stick to a 50-to-1 ratio and maybe even decline, which would result in silver continuing to outperform gold.
  • Along with its precious metal quality that has drawn in safe-haven investors, silver demand for industrial application also accounts for 40% of overall demand.
  • Silver prices have already soared above pre-crisis highs. Still, historic the silver-to-gold ratio is around 16-to-1, and if we were to translate that into today’s terms, silver should be in the $80 dollar range. This could mean that there’s room left to run.
  • According to BusinessWeek, silver prices may hit $35 an ounce in 2011, averaging around $30 on increased demand and higher industrial consumption. Philip Klapwijk, chairman of GFMS Ltd., stated that “looking at next year, I think it’s safe to say that the economic and financial factors will continue to provide significant support for global investment in silver.”

Sure, you can buy bars or silver coins, but ETFs are a far easier way to get your exposure to silver prices.

  • iShares Silver Trust (NYSEArca: SLV) and ETFS Silver Trust (NYSEArca: SIVR): Both ETFs are physically-backed and hold silver in vaults around the world. The greatest advantages of these funds are that they simplify the process of owning silver and deliver exposure to the spot price.
  • PowerShares DB Silver (NYSEArca: DBS): DBS owns futures contracts on silver. The biggest advantage is that the futures are rolled for you, and PowerShares has a contract rolling methodology that aims to mitigate the negative effects of contango.
  • Global X Silver Miners (NYSEArca: SIL): SIL holds the stock of silver miners; an advantage of equity commodity ETFs are that they’re not as volatile as funds that more closely track the spot price. At elevated prices, it only costs so much to get silver out of the ground, so miners are in a great position these days.
  • ProShares Ultra Silver (NYSEarca: AGQ): For a leveraged play on silver, think about a leveraged ETF. Just watch this ETF closely and understand how it works before you buy.

Max Chen contributed to this article.

Disclosure: None